Episode Transcript
[00:00:14] Speaker A: Hello, welcome to the Call It Like I See it podcast.
I'm James Keys, and in this episode of Call It Like I See it, we're going to take a look at the Silicon Valley bank collapse from earlier this month and the efforts that are underway right now to figure out what went wrong. And we'll also look at the role of government and as far as how it should and has been managing and preventing these types of situations, particularly, you know, the 15 years after the financial crisis, the great financial crisis.
And later on, we're going to discuss a popular technique many have been using to prevent burnout and be happier in our really busy, crazy world.
Joining me today is a man who may have a podcast, but is still known to move in silence. Tunde Ogonlana Tunde, are you ready to get into all your dreams and nightmares about our financial system?
[00:01:12] Speaker B: Clearly you don't know me if you've been told I move in silence and you believe it.
My family at home only wishes you were correct, so we'll leave it at that. But yes, we'll have fun talking about all this fun financial stuff.
[00:01:30] Speaker A: Now, we're recording this on March 27, 2023, and as most are aware, on March 10, Silicon Valley bank collapsed in what was the second largest bank failure in U.S. history, with the largest being Washington Mutual in 2008. Now, at this point, almost three weeks later, regulators are firmly in control and they've appeared to manage to prevent any kind of additional dominoes falling from other bank runs on other banks, at least anything major. And they've even, as of today, auctioned off the main assets of Silicon Valley bank to First Citizens bank shares.
But while we've learned a little bit since the collapse as far as what led to it and what actually happened, many questions still haven't been answered definitively. So to get us started, Tunde, we got congressional hearings coming up this week on the bank collapse, and we've had a couple of weeks for the fog to clear. So where do you think the ball was dropped here? Do we end up with such again, the second largest bank failure in US History, which seemed to happen out of nowhere?
[00:02:36] Speaker B: Yeah, this is fun. I just want to state something that I appreciate that you called it the great financial crisis.
[00:02:44] Speaker A: Yeah, I added great.
[00:02:46] Speaker B: It reminded me that versus a regular garden variety one.
[00:02:50] Speaker A: Yeah, there's financial crisis crises every day.
[00:02:54] Speaker B: But no, it's a good question. I think that as you mentioned, we're just a few weeks from the actual date when the FDIC actually took over Silicon Valley bank and from what we know now, I do think there is like many of these things. Right. There doesn't appear to be one catalyst or one reason. I think a couple things I'll take out of it. One is, I think there's a lot of muscle memory, not only in all of us in terms of our system, but clearly the regulators and the leaders of the financial and banking sectors. There's a lot of muscle memory of the 2008 collapse. And as you had mentioned, Washington Mutual, Lehman Brothers, certain other companies that all went bankrupt around the same time 15 years ago. So I think anytime we hear of a massive bank failure, it brings, for those who is most of us right. That were alive at that time, brings about those kind of feelings of, oh, is this something that's going to have contagion again? And that word is very important in this conversation and I know we'll use it again. And the idea of contagion would be what happened with Lehman, which is nobody knew who out there had what they call counterparty risk. You know, yeah, I might Trust you as Mr. And Mrs. Banker in your bank, but I don't really know what kind of loans and debts you took out. And if this thing is collapsing and falling apart, then you could be just as bad off as the next bank that's in the news. And so I don't want to do business with any of you.
[00:04:31] Speaker A: And so what, because of the interconnectedness we have in the system?
[00:04:34] Speaker B: Correct. Yeah. So what happens is that the perception can become a reality where the fear prompts people to pull money out and then really banks actually have no money. And then, you know, it's kind of just. It all implodes on itself. So luckily it appears to this point, and as you had mentioned, that a lot of action has been taken in front and behind the scenes, I guess, which we'll talk about. It appears that Silicon Valley bank seems to be more of an example of mismanagement of the bank itself than something more systemic or structural within the banking sector, at least so far. So I think that's where.
[00:05:14] Speaker A: Yeah, I would say I would agree with you in terms of, like, there have been identified several red flags, like they don't have a chief risk officer. You know, certain things that were. Are happening that they seem to be slow to react to. Like there are techniques to deal with it. When you have a lot of. Now maybe they had too many government bonds, but when the interest rates start going up, you're supposed. If your rates are low, you're supposed to do things to Mitigate that. So there seem to be some mismanagement. I mean some of this I think is inherent to the, just the idea of a fractional banking system. Like, yeah, fractional banking system means that the bank doesn't keep, sit there and keep all the money that's been deposited. They only have to keep a small percentage of that and then they're able to do things with the other money. So a quote unquote run on a bank can happen if, as we've talked about before, confidence is starting to shake. And that's what happened here. And then there was, they were the way that they were set up in terms of the type of clientele, a concentration in a certain type of clientele.
You know, they were set up in a way that things could cascade on them very quickly and things did cascade on them very quickly. Whereas. And then also they, it appears that leading up to this they weren't managing things that they should have been managing. But you know, when you put together the, and I'm not going to jump ahead here, but I just want to make this connection because we operate on a fractional banking system in that way where again, the bank doesn't, you put your money in, they don't have to just leave the money there, they're able to invest and stuff with it on the, on the theory that everybody's not going to try to get their money back at the same time. So as long as they keep enough around, keep enough reserves around, they should be okay. But that really like you can't have that kind of system with having some type of regulation and design to mitigate or cut off some of the low hanging fruit, at least from a, you know, from a risk standpoint because there's just inherent risk in that, but it's also a good way otherwise to do things. So I mean, I think we saw a way in which the fractional banking system, if things aren't either regulated properly or operated properly, can come up to bite you really quickly, you know, and again, so there's, you look at all those factors.
[00:07:12] Speaker B: Well and I think one of the areas, I mean let's, let's talk about a little bit what happened because it's good you bring up about the fact they bought bonds and all that. And I think this is where, you know, it's understandable most people in the general public don't do finance on a daily basis. So I get it that, that this stuff can be complex. But the reality is, to your point, this bank apparently was around, had around 70 billion in deposits around 2019, going into 2020. And then just during the last few years of the kind of boom of the pandemic with the CARES Act, PPP loans. Remember this was 50% of the venture capital startup in Silicon Valley used this bank. So there was a bit of concentration when it comes to that and I'm sure there was worry about contagion maybe in that sector of the economy, kind of maybe private equity, venture capital that dealt with the Silicon Valley type of investments. But, but what happened is they zoomed up to about 200 billion in deposits in a very short period of time. But that also kept them below the $250 billion threshold that they would have had to have met to have these annual stress tests from the regulator basically.
[00:08:27] Speaker A: For additional regulations to kick.
[00:08:29] Speaker B: Correct. So that somebody might have seen this, meaning a regulator before, you know, maybe that this was an issue before it played out like it did on the, on the public stage.
[00:08:38] Speaker A: Well, to be fair though, to be fair, there is evidence that's come to light that regulators did raise issues, quote unquote, with them. Hey, I don't know if you guys have been looking at this, but you got this problem or hey, but the question was, okay, well, so was the regulator just supposed to say something and then that's it, you know, they just move on like or. Because a lot of these issues remained outstanding, you know, and we're not, I know we're not going to go all the way down into. We'll have some, some, some stuff in the show notes that all listeners to kind of look more deeply into the specific, there's been specific red flags that people have looked at and so forth, but I, I jumped in. So do you want to finish up?
[00:09:13] Speaker B: Yeah, yeah, just to finish just a conceptual thing of what happened. So as you said, because there's some joke sometime in the financial industry that if the Fed keeps raising rates too much, they're going to break something. And I guess this is what I'm saying is the joke played into reality where yeah, something broke and that was this bank. And I think that, and that's where I was going to explain that the bank actually did the right thing, which is it didn't take depositors money and do like FTX did with the crypto, go buy, you know, pen houses and go buy Lamborghinis and stuff like that. Right. They did what they were supposed to do under the regulations, which is they bought safe assets, which in this case were long term treasury bonds. The problem is that this goes back to like you said about not having a risk manager, no one thought that rates could go up. So what happens is rates went up last year. The value of their bonds dropped 20 to 30% and then they had an unintentional run, which is several big depositors just wanted their money out around the same time. And so when the, when the bank went to go convert those treasury bonds back to dollars trying to sell them on the market, the value of the bonds were lower. And they had to say we don't have, we're insolvent literally right now.
[00:10:22] Speaker A: Like from what I was reading, like when you're in bonds like that and the interest rates go up, you're supposed to do. And again I'm not going down this road but supposed to do swaps and they didn't do like they didn't do that. And so then they're just sitting there holding these bonds as they, as when the government raised rates and they have the bonds at a lower rate, they lose relative value. So. But ultimately I do want to keep.
[00:10:41] Speaker B: Well, there was another reason I saw in the last few weeks. I didn't know if you want me to share that one.
[00:10:45] Speaker A: Hey, well if you want to go down that road, go ahead sir.
[00:10:49] Speaker B: I was watching a couple neck words and they said it was wokeism because they had a diverse board.
[00:10:54] Speaker A: Everything is woke, everything bad.
[00:10:56] Speaker B: You know, everything bad is they had one woman, one black person, they had an army veteran and a gay person. And apparently it was those four people that caused this whole thing.
[00:11:06] Speaker A: Of course because there's never been a fight, a bank collapse that didn't involve wokeism. Every time there's been 1929 it was the woke people, you know, like so I mean, of course, of course.
[00:11:15] Speaker B: And so you let me get that out. I appreciate it. I digress, go ahead.
[00:11:19] Speaker A: But, but I do think, you know, in a sense by saying, you know, like you're looking at one thing in particular as far as the contagion aspect, which is very important because that's the kind of stuff where the whole fight, the whole part or parts of the financial system can start to shake and crumble, you know, and other banks, are there going to be runs on other banks when one of the things we're seeing right now in fact is smaller mid sized banks, they've been seeing a net outflow with people going and moving their money to the bigger banks which are subject to higher regulation. I know you're going to get into some of this, but they are because they're subject to more regulation, you know they're like, oh, well, maybe my money's safer there. So this is already having aftershocks that are happening, but it seems like everybody still solve it. You know, everybody's still standing, everybody else is still standing. So. And the measures that have been taken. So I want to get into the government response. And as you said, the muscle memory piece, I think was very important here because the system seemed to have held. And one of the things I think that, you know, it's difficult for us to conceptualize sometimes when a catastrophe doesn't happen. Hey, maybe we should, like, be happy that the people who are steering the ship, so to speak, prevented the catastrophe. You know, like the Titanic, you know, like, we know they hit the iceberg and, you know, they went down. And it's like, yeah, that's messed up. That's bad for those people that were, you know, that decided to go or that were steering the boat. But for the boats that didn't hit the iceberg, you know, it's like, hey, maybe we should, you know, give the captain a thank you on that. And so I, I want to mention, at minimum, and I'll kick it to you after this, but just I must say I was impressed with the people who operated the financial system. They did things, and it wasn't universal things that were lauded. You know, when they said, okay, we're going to back everybody's deposit, normally the FDIC backs your bank deposits up to 250k. And the government came in and said, we'll back everybody's money 100%, which some people were upset about. But nonetheless, what the goal was is they didn't want a contagion. They seemed to really jump into action really quickly with the goal of we're not going to let this spiral out of control. And I just, I was very impressed by that, you know, because again, you got to acknowledge sometimes when crisis is averted, or at least so far has been averted, that, hey, maybe we got people that are steering the ship that are paying attention, that aren't asleep at the switch. So to me, that stood out like, okay, yeah, these guys really jumped into action.
[00:13:32] Speaker B: So tomorrow after this show, there's a bunch of contagion then.
[00:13:37] Speaker A: Well, but if that's the case, that's the case. But so far, though, I mean, it's like I said, we've seen our leadership be asleep at the switch, man.
[00:13:44] Speaker B: Yeah, yeah.
[00:13:45] Speaker A: So, like, to see him not asleep at the switch is great.
[00:13:48] Speaker B: No, I think, you know, to answer you directly again, I'll go back to One of my peers in this last year or so on this show, I've been saying this a lot. Leadership matters, right? Yeah. And a lot of examples I've given has been where I felt that maybe our political leadership has failed.
You know, some of the, I don't know, just what I feel maybe a political leader should be doing in terms of being responsible and not trying to divide people. But in this case, I would say that our financial leadership and leaders have succeeded. And I think there's something important about things like continuity. I mean, you know, Janet Yellen, who's the current treasury of the secretary, was the former Fed chair.
Jerome Powell, who's the Fed chair now, clearly was on the board of governors for many years and was around back in the 08 crash. For example, Jamie Dimon, the CEO of JP Morgan, who was instrumental in bringing confidence to another bank that was, you know, at risk of going under because First Republic bank, and he coordinated $30 billion in deposits from 10 banks.
[00:14:59] Speaker A: Yeah.
[00:14:59] Speaker B: His and nine other banks. That's important. Yeah.
[00:15:01] Speaker A: J.P. morgan.
[00:15:02] Speaker B: Yeah. And that's a leader, meaning he's been a head of. He's the only leader of a major bank who was, who's here now, who was there during the financial, Great financial crisis of 08 through 2010. So it's important when a guy like that who's got that experience can pick up the phone and call Wells Fargo CEO and call bank of America CEO and the other big players and say, look, I'm doing this. We're going to, you know, we're going to deposit 3 billion of our own cash into this bank. We need you to do the same because we need to, we need to gain confidence in the system. And I think along with that, it was a very important week. To your point, was when the US treasury announced, along with the fdic, that they were going to lift all the caps on all bank accounts.
[00:15:45] Speaker A: Yeah.
[00:15:45] Speaker B: And again, I, you know, especially in my practice, I deal with clients and people that don't just, they don't internalize this the same way on an everyday basis because they don't do it for a living, which is understandable. But instead of looking at is, oh, you know, you're giving people a way out and all this stuff. It's not about that. It's about like, we're talking about making sure there's confidence in the system. I got three phone calls in one day, one early in this thing from clients asking me, should they take, literally take their money out of the bank?
[00:16:14] Speaker A: Yeah.
[00:16:14] Speaker B: And I was just Thinking like, these people got millions of dollars. I was thinking, what are you gonna do? Like literally go there with sacks of money and tell them to give you your money? And I would just say, no, no, it's fine, it's fine. And it's part of what gave me the confidence was knowing that the system was gonna make sure that they just backstop all deposits.
[00:16:29] Speaker A: Well, but that's, that's kind of the thing is that it was unfortunate that they had to do that from just an objective standpoint. Like, man, you know, I wish we didn't have, I wish they didn't have to pull that cord and say they're going to insure people beyond the 250k. That is, that's normally stated, but it prevented a greater harm, you know, and so that's, but that's what we have these people in leadership for. When you're voting for a leader, you know, you're voting, I guess you're voting for Biden and he's putting in yelling, you know, a Treasury Secretary. Then what you're doing is you're trying to, you're trying to select people based on the judgment that they have that their ability to have a steady hand in crisis. And so we didn't, this didn't immediately become about blaming people and oh, it was, it was this person and that person. And again, Congress doesn't do any legislating, but they're good at throwing all these blame games back and forth, you know, but at least our executive branch and then the Fed, which you know, is. Operates separately from them, both were able to get together and like you said, industry leaders were able to get all of these people, all these serious people were able to get in and be serious about this and not try to make this about some other political calculation. But just like, look, we're going to do something that it's not a great thing to do, but we need to do this in order to sustain the system. And so that's the kind of leadership you want, you know, to be able to make that tough call or because if they don't and then there's a, there's a run on another bank, then it. That can, that, that greatly increases the chances that you're going to have as the words you use again, contagion, where people's. Then you're going to have 30 people calling you, saying, hey, should I take my money out the bank? You might say, no, no, no, you're good. And be like, like, no, I'm taking it out. Or your vice Might be different. If the leadership is either asleep at the switch or trying to play politics with this, then you're like, oh, I don't know. I mean, it doesn't look like these guys are really, you know, like approaching this in a way that is going to shepherd the country through.
[00:18:14] Speaker B: What they're trying to do is stop the A perception from becoming a reality, because it does. It's interesting. A lot of people, like you said, like we. People still think of things like the gold standard and all this stuff, and they don't really understand that this is all based on our confidence now. I mean, look, you could even say.
[00:18:30] Speaker A: All based on trust. Yeah, yeah.
[00:18:31] Speaker B: And you could even say gold was the original thing based on confidence, because gold really doesn't mean anything unless everybody feels that there's a value to it. Kind of like where crypto is now, right? Yeah. As long as everybody agrees it's worth something, it's worth something. But if they don't, it's not. And so it's the same thing with our fiat money. And I feel like that's where they did the right thing in terms of not allowing the perception that there's a problem of contagion in the system to then create the behavior of people to start drawing money on, bringing it to a reality, which would bring it to a reality, because as you said earlier, which was well said, in a fractional banking system, you can't at any given point assume that banks have all the money that they have that depositors believe is in there.
[00:19:17] Speaker A: You can in fact, know that they don't.
[00:19:19] Speaker B: Yeah, they don't. Yeah. And that's the thing is, like, it's not a sinister thing. We wouldn't have the type of robust economy and growth potential that we have if we didn't have a fractional banking system. We wouldn't go be able to borrow a home, money for a home, and only put 20% down. You know, these are things that we don't appreciate when we, when we hear these things and we assume that it's all some kind of Ponzi scheme or just the big fat cats are getting away with all this stuff. And I think one of the things just to finish out on this point, and I know you want to move, is another thing about leadership. It dawned on me and as you say it, it reinforced it as you were just talking now, which is, yeah, you vote, you know, not you, but somebody voted for Biden, somebody voted for Trump, somebody voted for Obama, somebody voted for George Bush, blah, blah, blah. Right.
The Beautiful thing about our financial system is designed to not be at the whims of political like of political football. So because it's a great point you make people that voted for Joe Biden, you know, through extension he appoints Janet Yellen. But what did I mention earlier, she was the Fed chair under Donald Trump. So what I'm saying is even though the politics and the players in that side change is actually we benefit from the financial system having a few key people that stay around the top doesn't mean it has to be the same person. But there's a lot of continuity there.
[00:20:46] Speaker A: And then, but I mean, and I'll say this, I don't think that it's irrelevant in terms of, you know, from a decision making standpoint on how the government's going to react. It is relevant in terms of like Yellen would not have been the same person necessarily that would have been appointed if Trump would have won again. And that's not to say that person, that person may or may not have been capable, you know, we don't know, but that there is a certain philosophy that's in play. He's selecting Yellen because he likes her philosophy. He's not picking her ideally. And again, this is another thing. Are we looking at are you picking people for their expertise? Are you picking people because they fit some partisan game and so that the system can work as intended.
Partisanship is not supposed to be about everything. You know, like all your decisions aren't supposed to be about partisanship. So the fact that it isn't about partisanship right now, again, at least on the people making decisions, is to be commended. Because right now we're having a crisis with that where we're have, where people are doing so, making so many decisions based solely on the idea of, well, does this benefit or hurt or harm me or help me politically or my allies politically. And so therefore I'm going to go down this road. In this case, we saw a crisis pop up and we did not see, at least on the surface, partisanship seemed to take a front, front page here. It was just like, look, let's deal with it. And so that's what you want though. You want serious people in office. And so that's, I just want to point that out. It's not a given. We've seen it's not a given in terms of dealing with these crisis that partisanship is going to be set aside or not even come up. And people are just going to, hey, let's find, let's talk to the smartest people and let's make this thing happen.
The other thing I wanted to discuss on this, though is actually from the government perspective and just looking at it from a regulatory standpoint. And is there anything you think we can take away, at least from what we know so far? Again, like there, there's gonna be some hearings this week. We'll probably learn a little bit more.
But, you know, it's. It looks like, you know, like I said, the people at the bank, as you noted, were, you know, weren't doing the things that they should have been doing. There was some mismanagement or lack of management that was happening that allowed something that people saw signs of early and then it just kept. None of those things were addressed.
So do you think that there's the current regulation, therefore then is insufficient or, you know, that maybe it's sufficient, but, you know, it was just an action thing. Like, what do you think this says about kind of our regulatory environment for these banks, particularly, again, in light of the fact that we have a fractional banking system and it relies 99% on people's trust and people's confidence?
[00:23:18] Speaker B: Yeah, I think it's a good question you ask. I think based on the conversation we've been having, I'd say that obviously there's a lot of regulations in finance, Right. So I don't know all of them, but seeing that this appears to be, like I said, the Fed broke something. Right. Rising rates caused the assets of this bank to go down, the bonds that they were holding, you know, to backstop their deposits, and they didn't manage their risk properly. It doesn't appear that other banks have had the exact same problem in the same way.
With that said, will this get everyone looking at revisiting regulation on financial system? Of course it will. So.
Which I don't think is a bad thing, you know, this part of what, you know, people listening here may have heard is that there was a slight changed to a regulation called the Dodd Frank regulation back in 2018, which allowed for some of these banks under. Or banks under 250,000 in deposits, or 250 billion in deposits, sorry, to escape the annual stress test from the regulatory environment. Now that may go away, right. And they may start stress testing everyone who knows.
[00:24:35] Speaker A: And the reason for that, by the way, as you mentioned to me offline, was that those banks, because their size, were having a difficult time just competitively financially dealing with all that regulation and then still being able to compete with the larger banks.
[00:24:48] Speaker B: Yeah. And to your point, right, like, I was just the AUDIENCE I was having a private conversation with James that I sat on the board once with the CEO of a local credit union and they had 600 million in deposits. That was it. It was a very small institution, all that. So what I could see is instead of saying, okay, anyone under 250 billion is exempt from this, maybe they'll just start breaking it down in tears that, you know, maybe they'll let a bank like that with under a billion, maybe allow it to report a little different. Because the problem for the audience is once you get into this regulatory stuff and you start hiring the fifteen hundred dollar an hour law firms in downtown Manhattan to deal with your financial regulatory.
[00:25:28] Speaker A: Disputes, but just to add, who are the people generally who have the years of expertise in dealing with this stuff? It's not like you're just going and wasting that money. It's like, all right, well who this very, very, very specialized thing, who can we do to do it? It's like, well there can't just find a guy on any corner, any attorney that can do that. You got to find the attorneys that, and those attorneys know that there are the few ones that can do it. And so they charge a lot.
[00:25:49] Speaker B: Yeah. And in the spirit of, kind of the American spirit of business and competition, the idea is that if, if it's going to cost 10, $15 million a year in legal and regulatory compliance to run your bank, well, clearly the small bank that only has $1 billion or less and maybe has revenue of 50 million a year in cash flow can't afford that. But someone like JP Morgan, who's making, you know, $100 billion a year in revenue, can't afford it. So that's why again, getting in the weeds with some of this regulatory stuff, there are different tiers and levels of regulation because it's supposed to allow the little guy to be able to grow and compete against the big players.
[00:26:24] Speaker A: And just to add some meat to those bones, it's not that they can't afford it per se, that's the effect of it. Because what it is basically is that, okay, they have to pay for all that. They're going to have to pass that on as far as the lower rates that they can offer, as far as CDs or their financial products aren't going to, they're not going to be able to offer as good a deal as JP Morgan Chase. And so they're going to be not as competitive and they're going to then lose business. And so inadvertently the concern is that you're driving the business to the big banks, which the catch 22 here.
[00:26:54] Speaker B: That's what I was just going to get at.
[00:26:56] Speaker A: What happened here actually started driving business to the big banks as well. And so a lot of these decisions, I mean, it, every action has a reaction, you know, so to speak. So you pointing out at the beginning of your statement that the Fed raising rates led to this environment where Silicon Valley bank collapsed. That doesn't mean the Fed was wrong to raise the rates. Like that's what happened. Like the, the financial system is fluid. Like they're trying to manage 12 things, or, you know, that might be understating it. They're balancing all these plates, they're raising the rates, trying to, trying to keep all the plates spinning that they got up. And then it was Silicon Valley Bank's job, okay, with this environment changing to then, okay, what do we need to do? We were balancing our own set of plates. And so that was the point that we made earlier, that it was actually them, that they were supposed to do things or that to deal with how the situation was changing, which is why it didn't seem to be that this was something systemic that was going to automatically or inherently cause other banks to fail. It would be more of an issue of does the public lose confidence because of this and then that causes other banks to fail. But from a regulatory standpoint, as you point out, like when something bad happens, it's reflexive to say, okay, well, maybe we need more regulation. But I think implicit in what you just laid out is really, it may not be that we need more regulation, maybe just need a closer look at how these things are partitioned, you know, because one of the things that's kind of stood out here is that the big banks are strong, you know, like, so. So perhaps the regulations where they're being enforced most strenuously are working, you know, as far as the stress test.
[00:28:29] Speaker B: Well, the interesting thing, and we've discussed this too offline, which is from a regulatory standpoint, it's almost at the point where, if you were serious about helping the little guys and creating this competitive business climate in the US where, let's say, people that aren't born into, you know, being the heirs and signs of existing large shareholders of banks, like, if two guys like us wanted to really go capitalize, get investors, raise money and go start a bank, you know, get through all the regulatory hurdles, then instead of trying to cater to such little guys that can't afford to compete anymore, what if they actually broke up the big banks and used regulation that way? Right Instead of saying I was building today We've got like four banks that have like literally 80% of the assets in this country. Why don't we just start breaking them up like we broke up at and T and allow, allow things to organically grow again.
[00:29:19] Speaker A: And, and the purpose of that by the way, like we get into. Okay, like when you're talking about regulation. I was, I wanted to touch on this as well but I'm going to get go off tangent for a second but when you're talking about the, the need for regulation, it's also you have to understand why the government is, is there to regulate what is that needed or why is that needed? You all same thing with the kind of the marketplace, so to speak, when you talk about breaking up the big banks. That is pro free market. Because guess what? You can't have a market without having a lot of competition. The market depends on competition and capitalism. If you don't break up companies from time to time will coalesce. You'll have, you'll have behemoths coalesce. That's the way the system inherently goes to a coalescing and then the government has to break it up and to reinstate.
[00:30:04] Speaker B: The guy that keeps winning and making more money is just not naturally going to take his foot off everybody else and say I'm just going to be a nice guy. It's everyone else's turn now.
[00:30:12] Speaker A: No, no. And that's a common misconception that we don't think about with our capitalist market system. Yeah. Because at the end if we, if the government does nothing, it just sits back. We'll end up with one person with all the money and that's it. Like it'll be Rockefeller, you know, and then just everybody else is kind of looking around. So yes, when you say, hey, well if we want to create more competition and allow the little guys or the medium sized guys to compete, maybe we shouldn't have these behemoths that just throw everything off. Maybe we should create a more robust market that's not say that's not socialist, that's free market, that's marketish. And so I'll kick it to you. But I do want to talk just briefly about in this along the same lines of why the reg. Why we're having this regulatory conversation. Because a lot of people again also seem to think that if the government just stays out of the way everything will just balance itself out and you know, like, and that, that there just won't be an issue. Just it's the Government that creates all these problems?
[00:31:05] Speaker B: Yeah, well, I mean, look, regulation has been around, I think probably as long as human societies because, you know, whether it was regulating, you know, how much grain could be eaten, you know, or taken during the winter before the next harvest, or regulating something like that, you know, there was always some sort of way that once you got out of a hunter gatherer society, how are you going to keep everybody on the same page and keep certain things within an equilibrium? Right. Then when we had the industrial age, you got things like regulating safety on the job and all that kind of stuff. And so clearly the, you know, regulating of financial systems and money and the legal processes behind all that is something that I think most people would say, yeah, I assume the government.
One of their roles, if they don't have any other role, is to make sure all that's going smoothly, you know, and someone out there is looking at these things and.
[00:31:55] Speaker A: Well, and that's kind of what you have to look at. I mean, regulation is not an attempt to replace market forces. Market forces matter as well. If somebody creates a poor quality product, then ideally market forces would call, cause them to sell less and go out of business. Ultimately, if they don't create a better product or if they're charging too much, same thing, the market forces would compel them to charge less or go out of business, so to speak. So that stuff, regulation isn't inherently intended to replace that, but it needs to be supplemented because marking market forces a lot of times are lagging, so to speak. And so if you look at food safety, for example, like the market force of causing a restaurant to have, you know, cleaner food, so to speak, or cleaner, more sanitary conditions would be a bunch of people getting sick. And so if you don't want to go through the experience, say, hey, well, we could just not regulate restaurants or, you know, grocery stores or whatever. And then whenever people get sick, they'll just stop shopping. What if they can identify where they got the food from? They'll just stop shopping there. And then that person will have to clean up their act. If you don't want to have to wait for that all the time, then that's where something like regulation can come into play. And when you're dealing with the financial industry, it's the same kind of thing. Our system is so dependent on the financial industry and being able to keep operating that you need to have regulation in place. Because we can't have, we can't have just banks failing all the time in order to make the point that, hey, banks, you Better be you, better, you know, manage your risk well or else you'll fail. You know, people will leave, you'll fail because it relies on shared trust. So in this case for banking, you know, like when you're looking at deposit banking, many have made the case that it's closer to a utility, it's closer to, you know, elect electrical company than to, you know, a, a car company, so to speak, in terms of selling you something that's a one off, you know, so you need the regulation in place because the system relies on that trust, relies on that confidence. And so you can't, the market forces mean something has to fail in order for the lesson to be learned. And you can't wait for that each time. Or else we didn't. And you've talked about this before the federal, before the Federal Reserve, we used to have banking crisis every 10 years.
[00:34:05] Speaker B: Yeah.
[00:34:05] Speaker A: You know, because that they needed the market forces to kick in and then people would chase clean up their act and then people would start skirting it again and then it would fail again and so forth. So when we talk about regulation, it's not some sinister thing. Now there's a balance to strike for sure because you, you don't want to stifle innovation. But at the same time this marketplace that we're creating, that we all share, that we're all, you know, people are trying to come up in and so forth, you want to have innovation in that, but you also want to, you don't want people breaking it every, every five seconds. You know, like you got to preserve the marketplace, so to speak. And in this banking and the financial industry and so forth is no different. You got the regulation has to be able to preserve it. Particularly in a situation where if things go wrong like we're seeing here, people are going to look at the government to solve it. So if that's the case, if taxpayers got to solve it, then you know, taxpayers need to have a seat at the table as far as hey, maybe you guys aren't allowed this risk is too much or that risk is too much.
[00:34:56] Speaker B: Yeah. It's funny because as you say that it's, it makes me think about how fluid so many things are. And as you're like. And also the idea of monopolies and collusion, I mean that's another reason why regulation in certain areas makes sense. So for example, you antitrust regulation. Yeah. And like I'm thinking as you were given your earlier example, I was thinking of like the food industry, like. Yeah. Or the tobacco industry before all the Lawsuits. Right. Like, we know that there are certain levels of salts and sugars that are bad for us to consume long term. Think about if it wasn't for at least the regulation we currently have on fast food and you know, how much trans fat and addictive certain things can be. You know, you figure there's a handful of food companies in the world right now, Hershey's, Nestle, sorry, Hershey's, I think is owned by one of the big boys. So it's Pepsi, Coca Cola, Nestle, and then, you know, Mars, I think. So let's call that one Big Arm. And then you've got the Tyson Foods and maybe three or four of the huge meat processors in this country. So long story short is without regulation, they could collude to put certain things in our food. And we did. Like you're saying, the market would know by us getting sick, but because they're the only ones producing it, we wouldn't have. They'd be able to exclude competition from coming in. Yeah, and, and starting.
[00:36:17] Speaker A: That's antitrust. Remember, without, before regulation, without regulation, you don't even get to know what's in the food. Food companies fought against that all along. Like, look, no, we're not going to tell you what's in the food. And the government says, no, you got to tell what's in the food. At minimum, you got to tell people what's in it. And so, and that was a big fight. And it's, I think that fight is coming back up, you know, where. So it's, it's antitrust. It is. There's a transparency aspect to it.
[00:36:39] Speaker B: You know, so the technology change. Because I think of a couple of things with, with banking real quick going back to where we've been on today.
[00:36:46] Speaker A: Is let's, let's get this, this, this.
[00:36:49] Speaker B: You know, the Dodd Frank legislation of 2010 was in response to the great financial crisis.
[00:36:56] Speaker A: Yeah.
[00:36:56] Speaker B: Which was somewhat, I mean, there's a lot of factors that went into that. But part of that, what caused that was the ten years prior in 1998, the repeal of Glass Steagall, which was a regulation that was in place because of the crash of 1929. Now what happened between 29 and the repeal of Glass Steagall were certain innovative financial products and tools that didn't exist back in the 1930s, like for example, credit default swaps. And what happened is these were, became a huge part of the, the kind of shadow economy because they weren't on an exchange or regulated. And they were part of the reason that Brought the banking system down in a way. So without getting in all the weeds on that, fast forward to Dodd Frank. What do they do? They brought certain of these derivatives and swaps on exchanges so they could be transparent. Now, you wouldn't have thought to do that in 1985 because they didn't exist yet. They were created in 1993. And of course, when they were created, just like kind of like crypto, right? Certain people just want to have their hand on it. They don't want everybody to know about this thing and they don't want the regulators coming in and all that. But it takes a crash, just like what happened with FTX and some of this crypto stuff, that finally the system says, okay, too many people are getting hurt from this now. Now we got to look at it.
[00:38:12] Speaker A: Yeah. And now we have to do something. You may, you've had early people ringing an alarm like, hey, this is going to be a problem. But a lot of times you don't have the will either politically or just in from a leadership standpoint to just, there hasn't been a problem. But hey, we're going to come in here and we're going to start telling everybody what to do. Like a lot of times for the regulators to come in and tell everybody what to do, you got to have a problem. And then, all right.
[00:38:32] Speaker B: Because you can't predict how all the different ways something can go wrong, the million different. You know, it's almost like a multiverse, right? Well, how could this play out? And you could sit there for years and they don't play out. And so you kind of got to let it happen. And I think that's what happened now is Fast forward to 2022, going into 2023, Dodd Frank actually made the banking system much more robust and resilient. I mean, think about getting through the pandemic and all this rising rates. And like you said, the big banks are well capitalized and well healed right now. But we found out that maybe the repealing of this little nuanced thing in 2018 of the banks that were capitalized a certain way, or 250 billion and under, now we can look back and say, okay, maybe that was a mistake, and now we got to figure out.
[00:39:18] Speaker A: How or it wasn't precise enough, you know, like the idea might have been, okay, you know, if you're not going to break them all up, but maybe you didn't implement that in a way, like did something like this happens, you know, a couple of years after, as you pointed out with when you Go from, you know, the Glass Steagall following the Great Depression to then that getting repealed. And then less than 10 years later, you got a crowd. Great financial crisis. And then in this case, after a great financial crisis, you got. I'm glad you did that timeline. You got Dodd Frank coming in. Hey, we'll clean this up. And then we. Let's roll back a little bit of Dodd Frank. And then we have a tremor, so to speak, a tremor that was controlled because in general, the sector was. Was very strong. And so that's that natural ebb and flow, though. So, I mean, the answer to the question really is that. Because the point. I think you made another good point. This stuff is fluid. This stuff is dynamic. Things are. Innovation happens. You know, rules, laws, regulations need to. They can't predict the future. And you don't want them out there. Hey, let's ban a bunch of stuff that we don't even know exists yet. You don't want them doing that yet. You know, like, let's let. Let people come up with the stuff. Let's see how it plays out a little. Let's learn a little bit about it. And then we'll figure out how do we put some guardrails on this so it doesn't take down the whole system. And so that's a. That's a dynamic process. It's constant ebb and flow. So right now there is an impetus for us to everybody take a look at. Well, you know, the experts take a look at it and figure out, okay, how can we prevent something like this or related things like this from happening, particularly happening so fast, you know, like, and so. And so forth. So hopefully, if, again, if we have serious leadership in place, which it looks like we do, then they'll be able to come up with something that puts us in a slightly better position. And then in a few years, we can roll that back and then we'll end up right back where we start.
[00:40:55] Speaker B: Till the next crash, when it's the damn woke board of that corporation that made it happen.
[00:41:01] Speaker A: Of course, damn it.
That's the Pavlov dog. That's the plan of political discourse. Now, if something is bad, just say it's woke. But, yeah, we can move on to the next topic from here. It was something very interesting. You sent me that immediately. You sent it to me. I took a look and I said, yeah, I love it. Let's do it. And it's the idea of basically, okay, this isn't breaking news, but energy is for your energy. The energy you have to do stuff in the day or in a week or whatever. It's finite. The more energy you spend, the more tired you are at the end of the day. I think we all learned that very early in life. But the idea of really tracking that, creating an energy budget and paying attention to that is something that can really increase your happiness. And it's something that will prevent you from burning out where burnout is almost precisely. Just keep going, keep going, keep going until you can't go anymore. So it's really about saying, okay, well, I could keep going, keep the fire going. But I've, you know, I've used my budget for the day, and so I'll. I'll step back. So what was, what about this stood out to you? What made you, you know, made. Made you send this to me and then, you know, I want to talk about this.
[00:42:12] Speaker B: No, it was, it was good because I think again, it's almost like regulation, right? It's always, ever, ever changing. Right?
[00:42:20] Speaker A: Regulation, Exactly.
[00:42:21] Speaker B: No, that's what I'm saying. It's kind of like, you know, what we learn about our bodies and how we regulate ourselves. I guess it is an interesting tie in, right? The word regulate, how we regulate our behavior, our energy, our mood, all that we. We are also learning because again, of the scientific and technological breakthroughs and the kind of the research of healthcare. Right? And so just. And I'd say this, a simple example would be me not eating a big bowl of pasta for lunch on a workday. Like, seriously. Right?
[00:42:58] Speaker A: That's an energy drink.
[00:42:59] Speaker B: Yeah, yeah, no, I've had enough, you know, lunches in my 30s and stuff. When I started, my body started reacting differently to, let's say, things that when you're in your 20s, you could eat a whole pizza and just keep going and be like, okay, you know, your metabolism's so high. But I remember starting to be, you know, hitting my late 30s, and I'd go have a nice big bowl of, you know, Bolognese, you know, at some nice Italian restaurant. And then literally by 2, 3 o'clock, I can't even focus. Like, I'm so lethargic, you know, and so that's a really basic way for me to explain. Okay, so I understood for my energy level in an afternoon on a workday to be where I want it to be, then I have to avoid certain behavior. Right? Eating foods like that high starch or high carb type of thing is probably not in my interest if I want to stay productive and have a lot of energy.
[00:43:50] Speaker A: And that's A really interesting point. Just real quick, let me jump in. Because what that goes into is that when you're looking at your energy budget, so to speak, it's not just activity, it's what you're, it may be what you're doing, it could be what you're eating. And is what I'm eating making an energy drain or do I feel more energized after I eat that? And so it's all different types of things you need to be looking at as far as how, what it does to your energy level.
[00:44:14] Speaker B: Yeah. And, and it's also like, because it's, it's. I think there's a few things that came out of this when I was thinking about, you know, just prepping for the day and, and this discussion. One is like I said, maybe where you are in life, the way your body reacts to certain things and your ability to identify that. Right. Like you and I joke that no more bottom shelf whiskey at this age. Right. You just know, right? I could drink some Southern Comfort or something when I was 22 years old. Let me give myself over the legal drinking age for that comment and be fine right the next morning and be okay.
[00:44:51] Speaker A: Yeah.
[00:44:52] Speaker B: Now it's gotta be 100 proof, you know, well refined and distilled for me to feel half decent. Cause if not, I'm feeling, I got a headache for three days. So right now, if I got a big presentation on Monday morning, guess what? I gotta regulate myself by not consuming certain things the day before. And so, and so what it made me feel was, you know, part of it is also this energy thing.
I for the first time preparing for this, realize how, because of the way our society is set up, especially kind of this industrial age, post industrial age environment where, you know, kids go to school at a certain time.
Our traditionally we had a nine to five office work environment up until the pandemic, where now at least with more people getting to stay at home and work remotely, you can manage your energy a little different. So think about it. We had to have an energy budget from 9 to 5 at all times. But think about it.
[00:45:51] Speaker A: But that's not even your whole day though. Because then I was going to say.
[00:45:54] Speaker B: For certain human beings, right, we've done the shows about early birds versus late people and all that, that, that doesn't work. And I think the interesting thing, and that's why I'll kick it back to you now, is when I became an entrepreneur, that actually was something I, I realized that I wasn't trained to do was manage my energy budget because I was still conditioned to be this Monday to Friday, 9 to 5. But at this point I could work Saturday and Sunday and then take Wednesday and Thursday off and not feel guilty about it because in my mind I'm like, well, I already spent enough energy in focusing on my business in this given time period.
[00:46:28] Speaker A: Yeah, you know, I mean, I don't.
[00:46:29] Speaker B: Have to feel guilty of following some prescribed, you know, time off thing.
[00:46:34] Speaker A: But I think the idea of looking at it as a budget and the example given in the article was, was about getting, you know, everybody pretty much understands or most people understand that you get your paycheck. You don't just go spend all the money. You know, like, it's like, okay, this has to last me X amount of time. And so I'm going to, then, you know, I have my expenses I need to take care of in this time frame and I have some, some stuff for some extra here, you know, like I. And then, you know, I might put some away or whatever just in case something else pops up. And so how we all budget, you can think of your energy levels in that. And like I said, the idea that it's not just what you're doing or that you're doing something that it's not everything you do isn't necessarily a net negative on your energy. For many people, exercising can be a energy booster. You know, as you pointed out, you know, like the idea of a hangover the day before is an energy minus the next day. You know, like if you're drinking on Sunday, that's an energy minus that's already taken out of your energy budget for Monday. You already know that. And so you have to approach it like that one. As you point, like, I think it was a good, good example you gave. Now some of that might have been age and some of that may be entrepreneurial. Because I'll agree with you, when you, when you're an entrepreneur, you definitely are more cognizant of how you're spending your time because that optionality then exists. You're not just there locked in for X amount of time. And when you get out, it's like, hey, I'm out. You know, it's like, all right, I want to be effective with this time because I can close this down, you know, if I need to, for something else, so to speak. But it's also an age thing though, is paying more attention because you, at a certain age, you know, in your 20s or whatever, your energy might feel infinite, you know, if, you know, you're doing other Things, right? Relatively. You're not eating crazy or whatever, but, you know, as you're in your 30s, your energy, you start to feel. Your energy is not infinite, but you may not necessarily be in tune with the ebbs and flows of it yet. But, you know, you get a little. Keep adding, Keep. Keep succeeding and adding more years. Then you kind of can be more in tune with it. But it's something that I would think, I would hope that I'm, you know, from reading this, that you don't have to. I come to this naturally, you know, is kind of the point I'm making there. But reading about it is like, oh, okay, I see. You don't have to come to this naturally if you just pay attention to it. The first piece of advice in the piece is saying, hey, take three days and write this stuff down. Like, all right, what are you doing? How do you feel? You know, yada, yada, yada. So you can. Something that may come to you organically if you're paying attention at 38 or 39, you can do that at any point in your life or something that may not come to you because, you know, like you said, you're. You're locked in from nine to five no matter what anyway. So it doesn't matter how you feel or anything like that. It's like, all right, I got to give these people 9 to 5, and then I just got to make sure I got enough to get me through till the kids go to bed or something like that now.
[00:49:16] Speaker B: And it's pretty deep because when you think about it, I mean, they talked about this too in the article, like this idea of burnout, right?
[00:49:22] Speaker A: Yeah.
[00:49:22] Speaker B: And I'm thinking about what I just said, like, because it happens sometimes where I'll work like a whole Saturday in my home office, you know, just focusing on whatever in my business.
And then like Monday morning, I might be slow, but on purpose, you know, I might just kind of work out, kind of do my reading, drink my coffee. I'd start working at 10 or 11am which is not normal. I'm usually an early guy, you know, trying to be at my desk at 7:38. And my point is, is that there's a time in my life where I'd have felt guilty about that when I was corporate, because corporate had me running on the. On the hamster wheel. And I think that's where a lot of people get burnout. Because at this point in my life, I start thinking about stuff like that seriously, like, all right, if I go force myself to be miserable, then it's going to have an effect on my home life because I know me, if I, if I'm miserable all day trying to force too much in the business, then I'm going to come home cranky and I'm going to be, you know, stirring up a hornet's nest there. That's then going to get me. If I get in a fight with my wife, that's going to get me down emotionally and I'll be thinking about it the next 48 hours. That's if it's a little fight, if it's a big one, I'm going to be screwed up all week. So I've started to learn that I started looking at my energy too is I got to do things that keep my energy in a place where I can always be the content version of me as much as I can be. No, seriously.
[00:50:43] Speaker A: No, the phrasing was.
[00:50:46] Speaker B: Yeah, because you think about the.
Just that the pressures we all have in our society and it's not easy. And that's where it's funny that I was going to quote that part where he says spend two to three days keeping track. And it says from commuting to scrolling on TikTok. And that's when I thought doom scrolling and that type of activity. Think about it, James, 15 years ago that stuff didn't really exist.
[00:51:11] Speaker A: Yeah, it's something else that's potentially sucking on your energy.
[00:51:14] Speaker B: Correct. That's what I'm saying. And then it got me thinking of these articles we've read all of us have seen in our news feeds in recent years. Right. Why do people feel like they don't have time? Why do they feel like they don't have energy? Why do they always feel like they're drained all the time? And I thought if you think about just doom scrolling and the access we have at our fingertips at any time it does take. People think that energy means you got to be sweating and working out, but mental energy is just can fatigue you just as much as all that. And so I was thinking about and then I'll kick out of here. But this is more of an emotional and energy play. But I was in bed one night and you know, let's say it's 10 o'clock, we're going to bed and my wife's on her phone and she looks at an email in her business email inbox and it disturbed her and got her upset to the point where she ended up not sleeping well that night and her whole day was messed up. And I told her I was like, you know, this is why you don't see me on my phone and all that stuff before bed and checking certain things. I said I've really regulated myself and I said, you're not wrong for being upset. I said it's just, that's why I won't look at emails like that within an hour before going to bed. Because I already know, like if I see something that disturbs me, it's gonna mess me up for the next day because I'm not gonna sleep.
[00:52:32] Speaker A: It's not a two way street. It's not like you'll see something great and then be. That'll make you sleep better.
[00:52:37] Speaker B: Yeah, exactly.
[00:52:38] Speaker A: It's only going to be either you're going to, either everything's cool and it's not going to affect you or something's going to be wrong and then you're going to have a bad night's sleep. So it's like there's no real upside to doing that. And I think this is like in some cultures this may not be something that is overly insightful, honestly. Like there are cultures that seem to have a different pacing to life. But in our culture in particular, and particularly that our attention is such the, is the biggest commodity out there right now. Our information and our attention is what everybody's after. That it does seem like that this is, this is the right information at the right time for many people in our society. Because yeah, the things that are draining you may not be the things that you think they are, at least the things that are draining you from a voluntary standpoint. Like there's some things that are draining you got to deal with no matter what. But you know, whether it be like you said the doom scrolling or the type of food you might have for a meal or something like that, or just taking the time to do a 30 minute walk and that could be something that's boosting you, but it's like I don't have time for that, yada, yada yada. And so because we have a culture that is so grind, you know, just grind it, grind it, grind it, grind it, grind it. Being mindful of this kind of thing, you can understand why like what they're touting is hey, this will make you happier in our culture, I can definitely see how this would make you happier because it, some of these lessons I've found myself adopting over the past few years and it definitely is making me happier. Like I said, I laughed when you said this. This does help me find the content version of myself.
So. And then I you know, I feel like I could be, you know, better as far as a husband, better as far as a father and all that.
[00:54:15] Speaker B: So, yeah, my family doesn't seem to like the non content version.
[00:54:19] Speaker A: So, I mean, so it's definitely worthwhile because we're social creatures. We got it how our energy is, how our moods are are going to affect the people, our loved ones that are around us. And so it's worth for yourself is worth doing and then for advanced the people around you is worth doing so. But we can wrap from there. We appreciate everybody for joining us on this episode of Call Like I see it, subscribe to the podcast, rate it, review it, tell us what you think, send it to a friend. Till next time, I'm James Keys Tunde, open. All right, we'll talk to you next time.
